Motives of transfer pricing strategies – systemic analysis

Abstract

Purpose The paper aims to explore the adoption attitudes of internal and external motivations by multinational enterprises (MNEs) concerning transfer pricing manipulation and to discuss on pricing strategies of MNEs under different motives of transfer pricing manipulation. Design/methodology/approach The paper conducts literature reviews regarding motives of transfer pricing manipulation and then conducts questionnaire survey and expert interview to select and generalize the transfer pricing manipulation decision making. Analytic network process (ANP) is then applied to obtain factors' weights and model construction. Findings The paper finds that tax minimization is no longer the focus of transfer pricing manipulation strategies of Taiwanese MNEs, and their real concerns are winning maximum economic profits, enhancing the competitiveness of the enterprise, and effectively repatriating profits to parent companies in order to facilitate greater economic profits. Research limitations/implications It is found from the model that most of the transfer pricing manipulation motives are based on low‐price strategies, which circumvent the exchange rate risks of low quotes. A possible reason is that current business operational patterns that have been limited to the electronic industry adopt the quantity‐based pricing strategy of “narrow profit margin and large volume.” However, the transfer pricing manipulation has great influence on the financial structures of the enterprises. The enterprises, as a result, must understand and reinforce the working of pricing transfer manipulation in the business development. Originality/value The paper collects questionnaires and investigation results from experts and scholars and uses ANP to construct a complete pricing strategic decision‐making model that may be taken by actual MNEs under different motives, in order to provide reference to MNEs when making transfer pricing manipulation strategies.

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